Economy Struggles as People Spend Less
By: Alice Su
Recently, the economy has been showing signs of recession, as consumers are spending less. While big companies like Google and Apple usually do very well, executives say that even their customers have been spending less. Walmart and Best Buy have warned that when they report their earnings in August, they will be much worse than expected.
But it’s not because people are simply not spending money. They are just being more prudent about what they spend it on. Inflation is forcing people to prioritize necessities such as gas and food, rather than clothes and electronics.
Thomas Combs, a 52 year old small business owner, says he has “completely changed” the way he buys things. He stated that he now cuts back on treats such as gourmet coffee and ice cream and knows buying a new car or house would be too expensive.
Not only that, but companies are beginning to slow hiring and outright cut people off. Though unemployment rates are currently low, they could change soon. Amazon, despite having strong consumer demand, said they would be more cautious with hiring. After overestimating customer spending last quarter and hiring too many people, the company said on Thursday that they have mostly corrected the issue. In the future, they say that they will “better align with expected customer demand.”
Thankfully, larger companies are doing better than Wall Street feared. The stock prices of Apple, Amazon, Google, and Microsoft rose. Due to skyrocketing oil prices, oil companies also made quite a bit.
“People were nervous there was some sort of bombshell lurking, and it never showed,” said president of Sevens Report Research Tom Essaye while talking about the tech companies. “For now, we sort of dodged a bullet.”
Apple customers usually have a higher income than the average consumer, meaning the company will be hit less hard by any economic crisis. “The main message is if Apple does start to feel softness, that means really bad news for everybody else,” said Carolina Milanesi, a consumer tech analyst. “That would mean the rest of the market would contract more.”
Clearly, the economy is teetering on the edge of a recession. But what can be done to stop it from tumbling down?